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Welcome back to the next blog in the SAP S/4HANA Cloud 2-tier ERP blog series.

In the last one, we discussed about Sales processes in a 2-tier model and saw how S4H Cloud can support the organization and subsidiaries to run in an independent yet integrated fashion.

In this blog, let's take a look at financial consolidation in a 2-tier deployment model.

SAP S/4HANA Cloud for subsidiaries provide agility, flexibility in financial processes and quicker book closure locally. Additionally, it enables subsidiaries to share their financial data with the HQs  (Headquarters) seamlessly for performing group consolidation and profitability, enabling local units to handle cash locally with global visibility into cash situations. It also enables central payment handling and provides capabilities to share HQ based centralized planning data with subsidiaries running S/4HANA Cloud seamlessly.

S/4HANA Cloud for subsidiary comes packaged with cloud based consolidation solution to take care of a company’s legal International Financial Reporting Standards (IFRS) based consolidation requirements. It also provide options to connect with HQs running SAP BusinessObjects Planning and Consolidation (BPC) and SAP Central Finance based deployments. With S/4HANA Cloud, finance functions can extract online Profit and Loss (P&L) account statements and balance sheet statements anytime and need not wait for a complete period closure to happen at the HQs


I can think of the following usecases for financial consolidation in a 2 tier world:

  1. Connectivity to Central Finance system running OnPremise with embedded planning and consolidation from a subsidiary running S/4HANA Cloud

  2. Connectivity to OnPremise SAP BPC on SAP BW from a subsidiary running S/4HANA Cloud

  3. Cloud based consolidation on S/4HANA Cloud

  4. API based approach to make subsidiary running S/4HANA Cloud, financial data available to Headquarters for group consolidation


Connectivity to Central Finance system running OnPremise with embedded planning and consolidation from a subsidiary running S/4HANA  Cloud

SAP S/4HANA Central Finance (Central Finance) is an S/4HANA system, installed as side-car, receiving financial accounting transactions via real-time replication from SAP or non-SAP ERP source systems. In cases were embedded real time planning and consolidation function has been enabled on Central Finance in Headquarters, its imperative to leverage this setup to have subsidiaries running S/4HANA  Cloud also to connect to central finance system for consolidation and group closure.

Replication of all financial documents (Transactional Data) that are posted in the S/4HANA Cloud System to an on-premise Central Finance System.

I feel, such an option in 2-tier provides the following advantages

  • Company wide single source of truth

  • Process centralization (benefit of Central Finance)

  • in-built mapping and error handling capabilities

  • pre-packaged integration solution


Connectivity to OnPremise SAP BPC on SAP BW from a subsidiary running S/4HANA  Cloud

SAP Business Warehouse (abridge SAP BW) is SAP's Enterprise Data Warehouse product. SAP BusinessObjects Planning and Consolidation (abridge SAP SAP), provides planning, budgeting, financial forecasting, and consolidation tools that can keep up with the fast pace of business – today and tomorrow.

In many Headquarters environment we see SAP BPC deployed on top of SAP BW as their go-to planning and consolidation solution. In such a deployment, there is a need to have subsidiaries running S/4HANA  cloud also to connect to SAP BPC for financial consolidation and group closure.


Cloud based consolidation on S/4HANA  Cloud

The most interesting consolidation option I feel is the complete cloud based consolidation to enable a group to get the clear picture about their corporate consolidated financial statements. Focus on the consolidation of actuals is the mantra here. The consolidation process can be broken down into: collection and preparation of reported financial data; consolidation of financial data. after the consolidation process, customer can use Fiori embedded Analysis reports and Business Object Cloud to analysis the consolidated result.


I feel, a cloud based consolidation comes with following inherent benefits:

  • Simple configuration for legal consolidation purpose

  • Data quality at source, no more late adjustments

  • Tight Integration: direct access to universal journal data for consolidation functions

  • Ability to bring in data from 3rd party systems

  • No need for costly OnPrem consolidation solutions


We continue to explore API based financial consolidation & cash management capabilities in 2-tier world in my next part of this blog.


Stay tuned for my next blog in this series.

For more information on SAP S/4HANA Cloud, check out the following links:

Follow us via @SAP and #S4HANA  or connect with me via srivatsan.santhanam